LionOre to go ahead with Maggie Hays expansion (January 18, 2006)

Suits at LionOre Mining International (LIM-T, LIM-A, LOR-L) have given final approval for the Maggie Hays Upgrade project at the company’s Lake Johnston nickel operations in Western Australia.

The project, which is budgeted at A$91.5 million (US$69 million) will expand annual capacity at the Lake Johnston mill to 1.5 million tonnes of ore, with a 20% increase in nickel production, to 14,000 tonnes per year. The expanded capacity will allow LionOre to process low-grade disseminated nickel ore from the Maggie Hays deposit.

LionOre’s consultants put the project’s internal rate of return at 47%, based on a nickel price of US$10,760 per tonne (US$4.88 per lb.) and a production cost of US$6,440 per tonne (US$2.92 per lb.).

Lake Johnston’s current feed source, the Emily Ann underground mine, will be depleted by the end of 2006 and Maggie Hays is scheduled to start feeding the mill in July 2006. Maggie Hays will be an underground mine, but will exploit both higher-grade massive ore and lower-grade disseminated ore.

Feasibility work last August calculated a probable reserve of 3.3 million tonnes grading 1.64% nickel at Maggie Hays. The reserve was part of a measured and indicated resource of 3.1 million tonnes grading 1.35% nickel in disseminated ore and 494,000 tonnes of massive ore averaging 4.23% nickel.

Both resource and reserve have a cutoff grade of 1% nickel, and the reserve is based on a price assumption of US$8,950 per tonne (US$4.06 pr lb.) and an Australian dollar worth US71.